 The
Money Management Newsletter: Taxes
and Estate Matters
Missed claiming a Capital loss in prior years?
Tax Court says it’s not too late, so re-file
By The Money Management Editor
Money Management Newsletter, June 2004
The Canadian tax system only allows for the deduction
of capital losses against capital gains for such investments as mutual
funds, bonds, stocks and other securities. If an investor has no capital
gains within the current tax year any capital loss can be carried back
three years or forward indefinitely to offset capital gains in those years.
However, it has been common practice to report any such
losses within the then current tax year even through they cannot used,
as to make them available for carry back or carry forward purposes. "While
this is good practical advice" says Jamie Golmbek, CA, CPA, CFP,
TEP Vice-President Taxation & Estate Planning at AIM Trimark Investments
in Toronto, "it may no longer be necessary based on a Tax Court decision
released March, 2004." The Tax Court judge disagreed with Canada
Revenue Agency's (CRA's) position that an individual's right to claim
a capital loss in subsequent years only exists if the loss has been properly
reported in a prior year's tax return.
The judge stated: "it is wrong to say that the
loss must have been reported in a return of income for the year in which
it was incurred" and that " The income Tax Act imposes no such
restriction. It permits a taxpayer to carry various types of losses forward
or back. It says nothing about requiring the losses to have been reported
in an income tax return."
"Findings in this case will benefit anyone
who may have sold a stock at a loss in the past but failed to report the
loss at the time, allowing that individual to claim that loss today or
in the future, against capital gains" notes Golmbek.
See: Taxpayers
can now delay reporting capital losses: a setback for CRA.
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